Cashing in on China’s eCommerce Boom

StefanOct 20, 2014

The race is on for foreign retailers to crack the Chinese e-commerce market, but many of the smaller players are being left behind. Some big retailers, like Swedish retail giant H&M, have decided to go it alone — it launched its own e-commerce website last month. The fashion retailer already has 228 stores in the country and sales have been brisk, but pursuing a purely offline model in China is no longer an option. ​For smaller brands, a more modest option is to launch through e-commerce operations like Alibaba or JD.com.

Alibaba’s Tmall has over 2,000 foreign brands already. Amongst the brands listed on these sites are many Australian labels, but their sales volumes still remain relatively small. Total online sales in China are expected to rise to $US356.1 billion in 2016 from $US169.4bn last year, according to Forrester Research. In general, Australian brands have been slow to take advantage of this ability to sell directly to China’s rapidly-expanding middle class via the web (Australia is missing out on the Chinese e-commerce boom, 13 June 2014).

eCargo, a new company founded by Hong Kong logistics tycoon John Lau, is hoping to change all that. The company aims to be a one-stop-shop for retailers wishing to crack the Chinese market by providing IT, marketing, operations, fulfilment and support services under the one roof. Chris Lau, CEO of eCargo, says that retailers can go it alone, but if they aren’t familiar with the terrain, they do so at their own risk.

“Running 100 per cent in house for any retail merchant who doesn’t have extensive experience trading online, is probably going to be a painful experience,” he told China Spectator.

Both John and Chris have extensive experience in logistics in the Asia Pacific region. CS Logistics is one of Asia’s most successful international freight forwarding, supply chain and logistics service groups. Chris Lau says many of the brands they have worked with offline have been slow, if not completely unsuccessful, at migrating their business model online.

“One of the things we’ve noticed in the past few years, is a lot of our traditional bricks and mortar brands really don’t execute and implement online very well.”

After a series of acquisitions over the past two years to boost their logistics solutions offering, they realised they had built up some capability to provide online services for customers.

“We realized, wait a sec, we actually have all the various operational and technological capabilities to help our offline merchants start to trade online,” says Chris Lau.

Growth is expected to come through its existing relationships with leading retail and fashion brands. Among the many household name brands John and Chris have worked with, are BIG W, Dan Murphy’s, Kathmandu, Myer and Rebel Sport. Woolworths were their first foreign client in 1990.​ Nowadays, the need for a China strategy is as much a defensive decision, not just offensive.

Foreign imported goods are at risk of losing out to local companies who have proved more nimble and quick to adapt to the quickly changing e-commerce landscape there (Why Brand China is poised for global dominance, 3 July 2014). Lau says the time is right for retailers to jump in now as young Chinese consumers enter the “golden age of spending”.

“These are the people who of course initially grew up with Taobao and Tmall over the past 10 years,” he says. “Now they’ve graduated, they’re working and they’re starting to start families.”

Lau says the trend towards more ubiquitous online payment services and increased use of mobile shopping augurs well for retailers. The region is the second-largest e-tailing market in the world, with estimated revenues of $US563.28bn in 2014, according to think-tank McKinsey Global Institute. It’s because of this huge growth potential that eCargo will initially focus on the Chinese market, before looking to Australia, the UK and Europe.

By combining their already formidable offline logistics experience with their new online capabilities, eCargo is in an enviable position to squeeze more savings out of e-commerce transactions. The IPO is expected to raise $40 million, through $100 million CDI’s at $0.40 cents each. The proceeds will go towards more acquisitions, tech investments as well as expanding marketing, big data analytics and R&D. The venture has caught the attention of Rupert Myer, who has come on board as an investor and director.

Lau says they played a significant role in turning around the supply chain for Myer after they were acquired by Texas Pacific Group (TPG).

“We were appointed by Bernie Brooks, global logistics and supply chain service partner for Myer, and helped him execute his international sourcing and logistics strategy,” says Lau.

Lau is hoping that the IPO will help the company make further acquisitions of complementary businesses as it expands further into China and Hong Kong. Their service is already connected to Alibaba’s Tmall and they are on their way to doing the same with JD.com, China’s second largest e-commerce site. The offer, which opened on 7 October, will close on 31 October and the company is set to list on November 17, with an estimated market capitalisation of $224m.

Sources:

The race is on for foreign retailers to crack the Chinese e-commerce market, but many of the smaller players are being left behind. Some big retailers, like Swedish retail giant H&M, have decided to go it alone -- it launched its own e-commerce website last month. The fashion retailer already has 228 stores in the country and sales have been brisk, but pursuing a purely offline model in China is no longer an option. ​For smaller brands, a more modest option is to launch through e-commerce operations like Alibaba or JD.com. Alibaba’s Tmall has over 2,000 foreign brands already. Amongst the brands listed on these sites are many Australian labels, but their sales volumes still remain relatively small. Total online sales in China are expected to rise to $US356.1 billion in 2016 from $US169.4bn last year, according to Forrester Research. In general, Australian brands have been slow to take advantage of this ability to sell directly to China’s rapidly-expanding middle class via the web (Australia is missing out on the Chinese e-commerce boom, 13 June 2014). eCargo, a new company founded by Hong Kong logistics tycoon John Lau, is hoping to change all that. The company aims to be a one-stop-shop for retailers wishing to crack the Chinese market by providing IT, marketing, operations, fulfilment and support services under the one roof. Chris Lau, CEO of eCargo, says that retailers can go it alone, but if they aren’t familiar with the terrain, they do so at their own risk. “Running 100 per cent in house for any retail merchant who doesn’t have extensive experience trading online, is probably going to be a painful experience,” he told China Spectator. Both John and Chris have extensive experience in logistics in the Asia Pacific region. CS Logistics is one of Asia’s most successful international freight forwarding, supply chain and logistics service groups. Chris Lau says many of the brands they have worked with offline have been slow, if not completely unsuccessful, at migrating their business model online. “One of the things we’ve noticed in the past few years, is a lot of our traditional bricks and mortar brands really don’t execute and implement online very well.” After a series of acquisitions over the past two years to boost their logistics solutions offering, they realised they had built up some capability to provide online services for customers. “We realized, wait a sec, we actually have all the various operational and technological capabilities to help our offline merchants start to trade online,” says Chris Lau. Growth is expected to come through its existing relationships with leading retail and fashion brands. Among the many household name brands John and Chris have worked with, are BIG W, Dan Murphy’s, Kathmandu, Myer and Rebel Sport. Woolworths were their first foreign client in 1990.​ Nowadays, the need for a China strategy is as much a defensive decision, not just offensive. Foreign imported goods are at risk of losing out to local companies who have proved more nimble and quick to adapt to the quickly changing…

Cashing in on China’s eCommerce Boom

Cashing in on China’s eCommerce Boom

2014-10-20

Stefan

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Stefan (from Austria, Europe) has been living, studying and working in China since 2010. Stefan has worked on several research, publication and consulting projects focusing on the China Travel Market. He holds two Masters degrees and is an expert on China Outbound Tourism, Marketing and Social Media in China. Stefan works with BMG on the Global Ready China Seminars as well as the Global Ready China News and related projects. He also has teaching engagements in the areas of eMarketing and Tourism Strategy.